Business

Factory activity index dips in China

The world's second largest economy is spiraling downward, slowly. Pressure is building on Beijing to take action as manufacturing eases and employment drops.

Fresh evidence emerged that China's economic slowdown continued when a beacon manufacturing activity report dropped to an 11-month low.

The preliminary HSBC/Market Purchasing Managers Index (PMI) reading for March was 49.2, down from 50.7 in February. That's the weakest reading since last April. The index tracks activity in factories, and a figure below 50 is regarded as a negative signal.

Economists polled by Reuters earlier projected only a slight drop, and some say the lower March PMI will add to fears that the Chinese economy is headed even further south.

A subindex in the PMI suggested that employment in China fell to its lowest level in six years. "The pressure on the government to stabilize growth and support employment has increased," says Liang Hong an economist at China International Capital Corporation.

China's economy expanded 7.4 percent last year, the slowest pace in a generation. The government reduced growth targets for this year to 7 percent, and the central bank cut interest rates last month for the second time this year to do something about it. Weak PMI data for March puts pressure on Chinese leaders to ease monetary policy even further.